GfK, the German market research group, today confirmed that it is considering an all-cash offer for Taylor Nelson Sofres (TNS) after dropping plans for a nil-premium merger with the company.

The German company made its announcement just hours after WPP, the UK advertising giant led by Sir Martin Sorrell, announced a hostile bid for TNS but without raising its £1 billion cash and share offer for the group.

Shares in TNS soared 29.5p, or 11.9 per cent, to 277.5p by midday, in anticipation of a bidding war for the UK market researcher.

The Times revealed last night that GfK and an unidentified financial bidder were preparing a last minute counter-bid for TNS in case WPP went ahead with a firm offer for the company by today’s 7.30 am “put up or shut-up” deadline, set by the City's Takeover Panel.

The German group said today: “GfK is actively pursuing a proposal which would involve an alternative all-cash offer being made for TNS with the involvement of an identified potential source of equity and equity related financing.”

GfK said that talks are currently at an early stage, adding that it has received “a strong indication of interest in this transaction.”

WPP launched its hostile bid but refused to raise its 260p cash and share offer for the market research group above the £1 billion deal already on the table.

There had been speculation that WPP could increase its offer to 280p a share to tempt TNS shareholders to opt for its deal instead of the nil-premium merger the market research group had been pursuing with GfK.

Commenting on the deal, Sir Martin said this morning: “Reluctantly, we have waived our earlier pre-condition for the board of TNS to recommend our offer.

“Despite repeated efforts over more than three months to engage with TNS management, we have been unable to enter into any discussions that could lead to an agreement.

“Although our offer may be characterised by some as a ‘hostile bid’, we believe that it is in no way hostile to TNS share owners nor to TNS’s clients and people. In fact, WPP believes it is more committed to maintaining the TNS brand than GfK.”

He added that he believes WPP’s offer is superior to “what is, in effect, a ‘nil-premium’ reverse takeover of TNS by GfK and a “merger of unequals”, and said the company remained willing “at the shortest of notice” to meet TNS’s board.

TNS released a separate statement advising shareholders to take no action in response "to WPP's latest unsolicited act" and not to complete any form of acceptance they receive with the WPP offer document.

It added that the board of TNS will be writing to its shareholders to set out its reasons for rejecting the offer from WPP.

It said: "In the light of this rejection, TNS has agreed with GfK to terminate the proposed merger and has permitted GfK to advance its discussions with an identified potential source of equity and equity related financing in connection with an alternative possible offer for TNS as an alternative proposal. "

TNS also announced that early indications of trading for June show "a continuation of the group's strong performance with the order-book for the full year significantly ahead of 2007".

Donald Brydon, chairman at TNS, said: "The Board has unanimously rejected the offer which substantially undervalues TNS. Shareholders should take no action and should not complete any form of acceptance in connection with WPP's offer."

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